California Commission Recommends Feed-in Tariffs & Other FIT News

Tariffs for Projects up to 20 MW
Tariffs Differentiated by Technology and Project Size

At the
California Energy Commission's final workshop on feed-in tariffs December
1, 2008, the presiding commissioners accepted the
staff's recommendation that California implement a system of feed-in
tariffs.

The staff will complete a final report in early 2009 and will submit it
for approval by the full commission. The report will then be incorporated
into the 2009 Integrated Energy Policy Report, the IEPR.

The recommendation calls on the Public Utility Commission (PUC) to
immediately implement a system of feed-in tariffs for projects up to 20
MW in size. The program should require a "must take" provision
and tariffs should be based on the cost of generation and not to the
Market Price Referant, the PUC's term of art for wholesale avoided cost.

The CEC also recommended that the CEC and the PUC "continue" to
evaluate feed-in tariffs for projects greater than 20 MW.

The PUC is not bound to follow CEC recommendations and both institutions
jealously guard their respective jurisdictions.

On October 20, 2008 the Governor of Hawaii, Linda Lingle, the Department
of Business Economic Development and Tourism, the Division of Consumer
Advocacy of the Department of Consumer Affairs, and the Hawaiian Electric
Company (HECO) signed an agreement to implement a feed-in tariff policy
in 2009.

The agreement, say the signatories, is to move the island state away from
dependence on imported oil, and toward indigenous renewable resources of
which the islands have abundance.

The state and HECO agreed to accelerate the development of renewable
resources on all the islands in the Hawaiian chain.

The agreement specifically binds HECO to implement a series of feed-in
tariffs to "dramatically accelerate the addition of renewable energy
from new sources". The parties further agreed that the feed-in
tariff "should be designed to cover the renewable energy producer's
costs of energy production plus some reasonable profit."

The agreement commits Hawaii to complete regulatory review by March, 2009
and to implement the resulting feed-in tariffs by July.

If implemented as conceived, Hawaii will have moved further and faster on
feed-in tariffs than any other state.

Europe has seen tremendous activity in the development of renewable
energy as a response to climate change. As a result, some of the most
important renewable energy firms operating in the U.S. are based in
Denmark, Germany, and Spain. Stable, high-level policy is one reason
Europe dominates this sector. . .

On December 18, the City Commission approved a higher tariff of $0.32/kWh
under Gainesville Regional Utilities' (GRU) proposed feed-in tariff
program. GRU had earlier proposed a tariff of $0.26/kWh with a 20-year
contract.

Solar installers had urged GRU and the City Commission to reconsider the
tariff arguing that even with the federal Investment Tax Credit, the
tariff was too low to make a sufficient profit during the 20-year
contract period.

The City Commission agreed and has set January 15, 2009 for the first
formal reading of GRU's proposal. They expect the policy to be formally
approved March 1, 2009.

There are several utilities in the upper Midwest offering solar PV
tariffs of $0.25/kWh. The programs in Wisconsin and in Michigan's Upper
Peninsula severely restrict the amount of solar PV capacity that can be
installed. For example, Wisconsin Public Service's recently approved
solar PV tariff is limited to only 300 kW.

There is 300 kW of solar PV already operating in GRU's service area. GRU
has also proposed grandfathering all net-metering customers into the
program once it's underway.

CanWEA criticizes RFPs and calls for procurement mechanisms that reflect
best practices worlwide: feed-in tariffs. The comments are made in
CanWEA's
WindVision 2025, a report that lays out CanWEA's vision of where and
how wind energy can be developed in Canada.

CanWEA says . . .

" In most of Canada, provincial governments have directed Crown
utilities to procure increasing amounts of wind energy and other
renewables through competitive tendering. At face value, it makes good
sense to contract for renewable energy supplies at the lowest possible
cost. On closer inspection, however, current procurement practices can
have unintended consequences which make it harder to capitalize on wind
power's full potential.

With competitive tendering, utilities bring new wind capacity on stream
in large chunks rather than in steady increments. While this may satisfy
the utility's needs for more power, it means that equipment manufacturers
face a 'boom and bust' scenario and an uncertain business climate that
offers little incentive to set up facilities in Canada. This cycle of ups
and downs also makes it difficult for wind energy developers to make
long-term investment plans for Canada. Good wind projects which have
passed the initial planning stage must sit on the shelf until new tenders
are issued, by which time developers may well have placed their capital
and people elsewhere. A procurement system which provided a more stable
outlook and a steady flow of opportunities would encourage turbine and
component makers to locate and produce in Canada and ensure that good
wind energy projects move forward.

Another downside feature of competitive tendering is that it is
technically challenging and very expensive for bidders to participate.
Responding to a Request For Proposal (RFP) for a major wind project will
entail thousands of hours of expert time and costs running into millions
of dollars. Not only does this take time and resources away from project
development and stakeholder engagement, it gives a distinct advantage to
large firms that have the financial capacity to carry these costs and may
deter community groups, municipalities, co-operatives and Aboriginal
communities from even taking part. One of the strengths of wind energy is
that it can be deployed at varying scales by a great variety of potential
project developers. Utilities and power authorities must adjust their
procurement processes to ensure that it is not only the big players that
can compete.

Competitive tendering can also lead to higher costs for wind power
projects. When Canadian utilities issue RFPs for new wind energy
capacity, they commonly receive proposals equivalent to three to four
times the amount of power they are actually seeking. So, competing is a
risky business and bidders factor this risk into their price proposals.
An effective procurement process should also look beyond price and factor
in other variables like community support and local economic benefits.

When it comes to procurement practices, experience in Europe may
offer useful guidance to Canada. Wind energy projects in many European
countries have an automatic right to connect to the grid and receive a
fixed price (feed-in tariff) for their electricity production. If
developers are willing to build wind farms at that price, they are free
to do so and can start selling electricity as soon as projects are
completed. The feed-in tariff system provides much greater certainty and
lower risk as developers can easily project whether a project makes good
business sense. So it's no surprise that countries which offer feed-in
tariffs are attracting huge wind power investments. This underscores the
need for Canada to rethink its procurement processes to improve our
ability to compete for global wind energy investment.

CanWEA calls on provincial governments to examine best practices in the
world's leading wind energy countries and adjust their procurement
practices to provide a stable and steady stream of opportunities and
accommodate a wide range of potential wind energy project developers. New
procurement processes should reward disciplined, long-term development
proposals and consider factors such as project quality, economic and
environmental benefits in addition to price."

Santa Monica's city council ordered staff to study the steps necessary to
implement a feed-in tariff on December 2, 2008.

The city, a part of the Los Angeles conurbation, joins a rapidly growing
list of cities in California discussing renewable energy feed-in tariffs,
including Palm Desert and Santa Monica's neighbor, the City of Los
Angeles.

The resolution emphasizes that the feed-in tariff could be part of the
city's Solar Santa Monica program.

"Request of Mayor Pro Tem Bloom and Councilmember O'Connor that the
City Council direct staff to investigate and report back regarding
appropriate steps to develop implementation strategies for a
"feed-in tariff" for solar energy incentives.

A feed-in tariff will allow any property owner and third party investor
to earn a reasonable return for solar electric investments in settings
that have, thus far, lagged behind in the Solar Santa Monica program and
throughout the State of California. It will promote reaching the energy
and climate protection goals of the California Solar Cities program,
support California utilities in achieving renewable energy mandates and
will catalyze the solar industry, creating sustainable green collar jobs
that foster climate protection goals. Finally, a feed-in tariff will
assist local governments in extending the benefits of low-cost solar
renewable energy to moderate and low income individuals and
families."

Positive mention of feed-in tariffs as a valuable policy tool for
developing renewable energy by E2 and the National Audubon Society
indicates that the idea, once marginalized, has now become main stream.

E2

In setting out its
priorities for 2009, Environmental Entrepreneurs (E2) is calling for
an increase in distributed generation in California through a feed-in
tariff.

Calling itself the "independent business voice for the
environment", E2 is an influential spinoff from the Natural
Resources Defense Council (NRDC).

The brief mention on E2's web site is the first time that an affiliate of
NRDC has publicly called for a feed-in tariff.

Audubon

In a
year end op-ed, the president of the National Audubon Society,
John
Flicker, outlined the environmental and energy issues confronting the
nation and what should be done about them. Flicker, a former Florida
state director of the Nature Conservancy, called for policies to increase
clean source of electricity, including feed-in tariffs.

"To increase the supply of clean electricity, we need to pay private
entrepreneurs a fair price to produce it. This can be achieved through
subsidies such as the Production Tax Credit, or by requiring utilities to
buy clean electricity at a price that guarantees a return on investment.
Congress will likely consider extending the Production Tax Credit when it
convenes, and several states are now looking at "feed-in
tariff" laws, which would require local utilities to pay a fair
price for clean electricity. They would then pass the cost on to
consumers."

The National Audubon Society is the US' premier bird protection
organization.

-End-

_________________________________________________________________________________________________
This news update is partially supported by the Jan & David
Blittersdorf Foundation in cooperation with the Institute for Local Self
Reliance, and the Sierra Club's Smart Energy Solutions Fund. The views
expressed are those of Paul Gipe and are not necessarily those of the
sponsors.
_________________________________________________________________________________________________
Paul Gipe
Tehachapi CA 93561-1741 USA
661 325 9590, 661 472 1657 mobile pgipe@...,
www.wind-works.org

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